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BUS 401: Business Ethics Essay -1: Bribery in Bangladesh

Case Analysis: Question 1) Analyze the case using ethical theories that you have learned
Answer:
In philosophical, theological, or moral discussions, corruption is spiritual or moral impurity or deviation from an ideal. In economy, corruption is payment for services or material which the recipient is not due, under law. This may be called bribery, kickback, or, in the Middle East, baksheesh. In government it is when an elected representative makes decisions that are influenced by vested interest rather than their own personal or party ideological beliefs.
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Relating with the ethical theories:


Although business executives and managers have an obligation to the corporation, in SRB Friedman clearly states that the pursuit of profit must be constrained by both legal and ethical considerations. Business executives should maximize profits while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom (SRB p. 33). Friedman would state that the manufacturer and exporters are free to take actions that minimize losses or produce profits for the organization as long as the actions are legal. Do not involve deception or fraud, and do not interfere with the competitive processes of the market.

Friedman's argument has two main thursts:

Profit maximization for shareholders

Incompetence to make decisions on ethical issues

Barenboim, Peter (October 2009). Defining the rules. Issue 90. The European Lawyer.

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BUS 401: Business Ethics Essay -1: Bribery in Bangladesh

Customer confidence
It is the ethical responsibility of every employee to ensure that customers are treated fairly and that no harm comes to customers as a result of using the companys products or services. From time to time, the officers in the company will have inside information that may not be known to the general public. This may be information about new products, plans or processes, mergers, acquisitions, negotiations relevant to significant business deals, contracts, sales, lawsuits, or special relationships with others. You cannot use undisclosed material information (including material facts and material changes) concerning the company, its shareholders or partners to your personal advantage, or the corresponding disadvantage of others in the securities market. It is also prohibited for a person with such information to give it to others, or "tipping", so that the other person may improperly make use of the information.2

The scenario in the given case:


In the case there were several informations provided: The organization is state owned It has the authority to operate independently Involvement of bribe to take the contract The organization is bureaucratic and decision-making authority lies with top management. Fraud and deception was clearly involved in the situation. The president had a good relation with the procurement committee and also bribed him for getting the contract. The president also exploits his power and moreover the bribe was shared with other members of the company. In addition to these ethical considerations, Friedman places two other important restrictions on the pursuit of profit: Business people must commit no deception or fraud, and they must maintain open and free competition. 3So if we apply these restrictions in this case, it means that individual s are free to pursuit their interest (such as making profit) as long as they do not interfere with the economic and political freedom of others. Such interference occurs when
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Miller, C. (2009). The Conditions of Moral Realism. The Journal of Philosophical Research, 34, 123-155. Miller, C. (2009). The Conditions of Moral Realism. The Journal of Philosophical Research, 34, 166-175.

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BUS 401: Business Ethics Essay -1: Bribery in Bangladesh individual in business, for instance, breach contracts, cheat customers, misrepresent the efficacy of their products, withhold important information on product safety, sabotage a competitors operations, or monopolize markets by political means, such as lobbying the government for protection against imports.4 In this case there was clearly breach contracts, cheat customers, misrepresent the efficacy of their products, withhold important information on product safety, sabotage competitors operations, or monopolize markets by political means, such as lobbying the government for protection against imports. According to Milton Freidmans theory managers are said to be agents of their employer and their foremost duty is to maximize profit. Managers are hired to work for the company and play the role as a representative of their employer. The guidelines are given to them to complete their task and their job is to make sure that the business objectives are met. In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom. Of course, in some cases his employers may have a different objective. A group of persons might establish a corporation for an eleemosynary purposefor example, a hospital or a school. The manager of such a corporation will not have money profit as his objective but the rendering of certain services.

Phillips, R., Robert; Edward Freeman (2003). Stakeholder Theory and Organizational Ethics. Berrett-Koehler Publishers.

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BUS 401: Business Ethics Essay -1: Bribery in Bangladesh

Question 2) why is this important to have code for this particular situation? What factors should be considered while preparing a code of ethics to encounter the particular situation?
Answer:
An ethical business has to be concerned with the behavior of all businesses that operate in the supply chain i.e.

Suppliers Contractors Distributors Sales agents

Pressure for businesses to act ethically Businesses and industries increasingly find themselves facing external pressure to improve their ethical track record. An interesting feature of the rise of consumer activism online has been increased scrutiny of business activities. Pressure groups are a good example of this. Pressure groups are external stakeholders they

Tend to focus on activities & ethical practice of multinationals or industries with ethical issues

Combine direct and indirect action can damage the target business or industry

Is ethical behavior good or bad for business? The advantages of ethical behavior include:

Higher revenues demand from positive consumer support Improved brand and business awareness and recognition Better employee motivation and recruitment New sources of finance e.g. from ethical investors

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BUS 401: Business Ethics Essay -1: Bribery in Bangladesh

The disadvantages claimed for ethical business include:


Higher costs e.g. sourcing from Fair-trade suppliers rather than lowest price Higher overheads e.g. training & communication of ethical policy A danger of building up false expectations

Supplier/Customer Relations In addition employees and business owners must consider the ethical issues involved with their relationships between suppliers and customers. Business owners in particular must consider whether it is ethical to do business with suppliers who have unethical practices. When dealing with customers or clients, business people must ensure that they use their information correctly, do not falsely advertise a product or service, and do not intentionally do sub-standard work. Business people are now held accountable for their own actions, as more and more people are now demanding that they meet their social duty not just for their country but most especially to their customers, which are considered as their life and blood. An unsatisfied customer can definitely hurt any company, something that no one would want to happen. So how does one business determine what is ethically unacceptable and acceptable behavior? Where do business owner, chief executives and employees get their standards or guidelines for ethics? Is there a definition for business ethics that can really set an honest and fair business practices?5 This is the dilemma that many employees and business owners are facing every day. Everyone will somehow and someday is faced with a decision that involves ethical behavior.

Cory, Jacques (2004-09-29). Activist Business Ethics. Boston: Springer.

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BUS 401: Business Ethics Essay -1: Bribery in Bangladesh Since, there is no clear definition of Ethical Issues in Business then it would be really hard if all you have are guidelines that the company gave you. Fairness and honesty are big issues, a very complex dilemma especially if this will somehow hurt the business. Since ethics are moral issues, thus making a decision that will have negative effect on the company is going to be tough for the person who will be making the decision. An individual can make either a right or wrong decision, depending on how it will affect his life and work status. In view of the fact that ethics are moral issues your beliefs and values will definitely be tested. A business will react accordingly to its moral guidelines and principles if the owners and executives do not lose sight on the essential value of fairness. However, if they choose to use legality and profitability as their measurement in determining what is right from wrong then business ethics will surely becomes irrelevant. A discussion of ethics is actually a subjective issue. Everyone will always have their own concept of righteousness; therefore a one definition of business ethics can be difficult. Moral standards are created by home environment, religious beliefs and traditions and thus making ethics hard to define, but not impossible to make. We have already seen that there is a lot of room for corruption when government tenders for goods or services. To address this, the Act requires the Minister of Finance to create a Register of Tender Defaulters. 6 This Register should be kept by the National Treasury. Whenever a person or business is convicted by a court of law of crimes involving contracts or tenders, their names and details, including the names of Directors, are recorded in this Register (together with details of the crime). This creates an additional 'penalty' for these people or businesses:

Cory, Jacques (2004-09-29). Activist Business Ethics. Boston: Springer.

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BUS 401: Business Ethics Essay -1: Bribery in Bangladesh Existing government contracts or tenders that they have can be cancelled immediately and they might have to pay any costs that result from this. Their names remain on the Register for between 5 and 10 years. While their names are on the Register, they are not entitled to any new contracts or tenders. It won't help anyone convicted of these crimes to simply change the name of their business or to start a new business to try and get around this. Instead, the details of any new businesses that these people start must also be entered on the Register. 7 Lastly, the Act requires a person or business convicted of these crimes to say this in any future applications for contracts or tenders. If they don't, they will be guilty of another crime and can be fined or imprisoned.8 While preparing this code of ethics to particular situation the following factors should be considered: Disclosure of information: The employees should not disclose the company information to third parties and other outside organizations. However the employers should reveal the various policies of the organization to their employees and make them aware about the code of conduct and other policies. Conflict of interest: An employee should not indulge into other professions or services or other interests which might conflict with the interest of the company. This means personal interests should not overshadow organizational interests. Confidentiality: Employees should protect companys confidential information. The financial records and unpublished data should be kept within the organizations and should not be spread outside the organization.

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Kelly, Eugene. 2006. The Basics of Western Philosophy. Greenwood Press: 160. Ellis, C. (2007). Telling secrets, revealing lives: Relational ethics in research with intimate others. Qualitative Inquiry, 13, 3-29.

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BUS 401: Business Ethics Essay -1: Bribery in Bangladesh Equal opportunity employer: This factor expects the employer to be an equal opportunity, that is, no discrimination should be done on the basis of caste, color, race, gender, religion or physical disabilities. Misusing company resources: Employees should not misuse company resources, intellectual property, time and other facilities. They are provided to them for business purposes and thus, should be used in a cost effective way. Payment and gifts: The employees should neither accept nor offer any kind of illegal payments, donations, remuneration and gifts from outsiders.

Illegal payments It is expected that suppliers do business in an ethical and transparent manner. Suppliers must not offer bribes, kickbacks or improper payments of any kind to government officials or other third parties for the purpose of obtaining or retaining business or gaining an improper advantage. 9

Commitment to the suppliers Relationships with its suppliers must be characterized by honesty and fairness. We are guided by the following standards of behavior: We will not make payments to any employees of suppliers to attain lower prices. We will not reveal a suppliers pricing, technology or other confidential information without prior written permission. We will not make false or misleading remarks to others about suppliers or their products or services

Phillips, R., Robert; Edward Freeman (2003). Stakeholder Theory and Organizational Ethics. Berrett-Koehler Publishers.

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BUS 401: Business Ethics Essay -1: Bribery in Bangladesh After saying all these, we must conclude that, as long as they are being legal, Managers are to exercise reasonable care in the performance of duties to put the employers interest ahead. This is their duty of service, obedience and loyalty to their stockholders.

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